EI410267RT; EJ410073RO

                             STATE OF NEW YORK
                          OFFICE OF RENT ADMINISTRATION
                                   GERTZ PLAZA
                             92-31 UNION HALL STREET
                             JAMAICA, NEW YORK 11433

      APPEAL OF                                DOCKET No.EI410267RT;EJ410073RO

             Arnold Gumowitz, owner,      :  DISTRICT RENT OFFICE
                      and                    DOCKET NO. AK410123-R
             Howard S. Grant, tenant        

                            PETITIONERS   : 


      On September 30, 1990, the above-named petitioner-tenant filed a 
      Petition for Administrative Review against an order issued on August 29, 
      1990, by the Rent Administrator, 92-31 Union Hall Street, New York, 
      concerning the housing accommodations known as 235 West 76th Street, 
      apartment 14D, New York, New York, wherein the Rent Administrator 
      determined the fair market rent pursuant to the special fair market rent 
      guideline promulgated by the New York City Rent Guidelines Board for use 
      in calculating fair market rent appeals.

      On October 3, 1990, the above-named petitioner-owner filed a Petition 
      for Administrative Review of the same order.

      The Administrative Appeals are being determined pursuant to the 
      provisions of Section 2522.3 of the Rent Stabilization Code.

      The issue herein is whether the Rent Administrator's order was 

      The Commissioner has reviewed all of the evidence in the record and has 
      carefully considered that portion of the record relevant to the issues 
      raised by the administrative appeals.

      This proceeding was commenced by the tenant as a fair market rent appeal 
      on November 5, 1986.  

      The tenant had assumed occupancy as the first stabilized tenant pursuant 
      to a two year lease commencing on August 1, 1986 and terminating on July 
      31, 1988 at a monthly rent of $3,250.00.In an answer dated December 22, 
      1986, the owner asserted that the tenant filed an overcharge complaint, 
      the tenant was the first stabilized tenant after vacancy decontrol, that 
      the tenant had been served with a DC-2A form advising the tenant of the 
      right to file a fair market rent appeal, which the tenant had not done, 


      and therefore the tenant was time barred from filing a fair market rent 
      appeal.  The owner submitted an undated and undocketed Report of Vacancy 
      Decontrol naming the tenant herein as the first rent stabilized tenant 
      and a DC-2A notice dated August 14, 1986, addressed to the tenant 

      By submissions dated December 14, 1989 and February 12, 1990, the tenant 
      amended the complaint to allege that the owner had established a  
      "pattern"  of filing false documents in order to illegally decontrol 
      apartments in the subject building.  

      The tenant submitted a copy of an owner's Report of Vacancy Decontrol 
      which had identified a George Mayer, a business partner of the owner, as 
      the new tenant, effective April 1, 1986 at a rent of $3,500.00 per 
      month.  The tenant contended that this reliance on an  "illusory"  
      tenancy is proof of the owner's  "willful"  overcharge, and treble 
      damages should be awarded.

      Specifically, the tenant charged that the owner had listed George Mayer 
      as initial stabilized tenant in order to illegally deprive the 
      complainants of a fair market rent appeal and to establish an unfairly 
      high rent for the apartment.  This was done, the tenant explained, by 
      waiting 4 months after the commencement of Mayer's lease-which was  
      "illusory"  because Mayer never took occupancy of the apartment-and then 
      renting the apartment to the complainants, who were thereby denied the 
      opportunity to challenge the rent because the 90 day period to challenge 
      the rent had already elapsed.  The tenant then alleged the owner 
      followed the same procedure in another apartment, #8A, with an  
      "illusory"  initial stabilized tenant who is identified on the 
      application for statutory decontrol as Paul Restaino.  As proof of their 
      collusion, the tenant submitted a copy of an Amended Business 
      Certificate Form for  "York Seventy-Seven Associates"  dated April 2, 
      1981, establishing a business partnership consisting of 5 individuals, 
      four of whom are Paul Restaino, George Mayer, and the owners, Arnold and 
      Anne Gumowitz.

      By notice dated April 23,1990, the owner was afforded an opportunity to 
      submit comparability data for use in determining the fair market rent 
      and was advised of the requirements for the use of such data. In its 
      response dated June 8, 1990, stating that he had never claimed that 
      Mayer was the first stabilized tenant, the owner denied the tenant's 
      alligations, that that tenant did not take occupancy of the apartment as 
      contemplated and therefore the owner did not rely on documents prepared 
      for that tenancy, that the owner sent the compainant tenant a notice of 
      opportunity to file a fair market rent appeal and that the tenant 
      thereafter filed an overcharge complaint.  The owner asserted that a 
      similar situation occurred with apartment 8A.  In addition, the owner 
      challenged the information in the Rent Administrator's Summary notice of 
      May 9, 1990, and claimed that the correct amounts to be used werea 1989 
      MBR of $790.86, plus 1987 a fuel cost adjustment of $32.88.  
      The owner submitted documentation consisting of contracts and cancelled 
      checks for its maior capital approvement claim  (MCI)  and apartment 
      improvements. The owner also submitted comparability data including 
      legal regulated rents for the A,E and D lines of apartments in the 
      subject building and market rents for a number of apartments in 
      neighboring buildings.  Finally, the owner protested the Rent 
      Administrator's conversion of the tenant's original overcharge complaint 


      into a fair market rent appeal, but, at any rate, contended that the 
      tenant's request for treble damages was inappropriate.

      In Order Number AK-410123-R, the Rent Administrator adjusted the initial 
      legal regulated rent by establishing a fair market rent of $1,218.97 
      effective August 1, 1986, the commencement date of the initial rent 
      stabilized lease.  The fair market rent was determined solely on the 
      basis of the special fair market rent guideline.  The Administrator 
      determined that apartments 8A and 4E were decontrolled within the 
      required time period, but that apartment 8A could not be used in the 
      comparability study because a fair market rent appeal was pending for 
      that apartment and apartment 4E could not be used because the owner had 
      failed to submit a DC-2 notice or RR-1 apartment registration form with 
      contemporary proof of service.  The Administrator also determined that 
      the apartments in neighboring buildings cited by the owner failed to 
      meet the requirements of the Rent Stabilization Code.  The Administrator 
      allowed a rent increase of $8,260.81 for improvements out of a total 
      cost of $10,432.27.  The Administrator determined that the tenant had 
      paid excess rent of $102,677.77 through July 3,1990, and directed the 
      owner to refund such excess rent to the tenant.

      In its petition, the owner contends that the tenant's complaint was not 
      a fair market rent appeal but an overcharge complaint, and that since 
      the tenant did not file a fair market rent appeal within the 90 day 
      period after the tenant received the DC-2A, the DHCR was incorrect in 
      processing the complaint as a fair market rent appeal.  Furthermore, 
      since all renewal leases were pursuant to the applicable guidelines, 
      there was no overcharge either, and the entire complaint should have 
      been dismissed.  

      The owner then disputes the Administrator's order, in the alternative.  
      Specifically, the owner repeats the criticism of the MBR calculations 
      from its letter dated June 8, 1990, and claims that since the wrong data 
      was used, the order must be remanded and re-processed.  The owner then 
      protests the Administrator's rejection of its comparability data 
      concerning apartments within the subject building and in buildings 
      located in the same general area.  Specifically, he contends it was 
      erroneous to only consider apartments decontrolled within the period 
      four years prior to and one year subsequent to the commencement of the 
      initial rent stabilized lease for the subject apartment because this 
      excludes rents generally prevailing the same area for substantially 
      similar accommodations.  With regard in to apartments within the 
      building, the owner asserts that apartment #11A, which was rented for 
      $3,000.00 per month less than two years after the renting of the subject 
      apartment, should have been considered.  

      The owner also charges that the exclusion of apartment #8A, which had an 
      initial stabilized rent of $2,800.00, was improper because such rent was 
      only challenged for the purpose of making the apartment ineligible for 
      comparability purposes; that the tenant of that apartment was "obviously 
      acting in concert with the complaining tenant herein"; that the tenant 
      of that apartment was served with a DC-2A notice and signed a receipt 
      therefore, which documentation was submitted to the Administrator, and 
      that tenant failed to file a timely challenge to the initial rent.  The 
      owner also claims that apartment #4E, was erroneously rejected based on 


      the owner's failure to submit the DC-2 or RR-1 with contemporaneous 
      proof of service when in fact such proof was submitted.  The owner also 
      submits with the petition an affidavit from the managing agent of the 
      building attesting to the mailing of the DC-2A notice to the tenant of 
      apartment 15A by certified mail.  However, even if proof was not sent 
      with regard to apartment #4E, the owner contends it was arbitrary and 
      capricious for the Administrator not to inform the owner of any 
      deficiency in proof of service, when the owner was so informed in 
      another fair market rent appeal proceeding in the same building  
      (apartment 15A).  The owner then criticizes the rejection of the owner's 
      comparables of rents for substantially similar housing accommodations in 
      the same area as "arbitrary and capricious," since whatever 
      documentation the owner did not submit-which the Administrator did not 
      specify-was readily available with the DHCR's own records.  Finally, the 
      owner asserts that the Administrator failed to give to owner credit for 
      major capitol improvements.  In a supplement to the petition, dated 
      November 8, 1990, the owner submits a copy of an agreement that was 
      signed by the tenant of one of the comparable apartments, #8A, wherein 
      that tenant withdrew her challenge to the rent, thereby allowing the 
      apartment to be used as a comparable in the subject proceeding.  The 
      enclosed document, which was signed by the owner and the tenant of 
      apartment #8A, and their respective attorneys, stipulates that the 
      tenant agrees to vacate the apartment, pay back rent to the owner and to 
      withdraw her complaint of rent overcharge with the DHCR  (Docket No. 

      In response to the owner's petition, the tenants contend that they had 
      no choice but to file their complaint as a rent overcharge procedure 
      because the owner had attempted to block any future fair market rent 
      appeals by using the name of his business partner, George Mayer, as the 
      first stabilized tenant of record, and waiting more than 90 days before 
      renting to the tenants.  Rather than being dismissed on procedural 
      grounds, the tenants chose to file an overcharge complaint.  

      The tenants also argue that the owner engaged in a similar pratice with 
      respect to apartment #8A.

      In response to the tenant's response, the owner denies that the renting 
      of the subject apartment and #8A to his business associates was part of 
      any plan to foreclose fair market rent appeals, as evidenced by the fact 
      in both cases the business associate did not take occupancy and the 
      subject tenant, as well as the initial tenant of apartment #A, were both 
      sent copies of the DC-2A Form.  

      The owner asserts that in as much as the complainant tenant failed to 
      file the appeal within the 90 day period after receiving such notice, as 
      documented earlier by the owner, and there was no rent overcharge, the 
      tenant's complaint should have been dismissed.   Moreover, since the 
      tenant of apartment #8A withdrew her complaint, the initial rent of that 
      apartment becomes the legal stabilized rent, and should be allowed for 
      purposes of comparability.

      In his own petition, the tenant contends that because the owners failed 
      to submit documents warranted by the New York City Department of 
      Buildings for electrical and plumbing work, there is no way to 


      independently verify whether the claimed improvements were ever 
      performed.  In addition the tenants claim that the workmanship on the 
      tile floors in the bathroom was inferior, with the result that the tiles 
      loosened and dislodged, causing a hazardous condition in the apartment.

      In response to the tenant's petition, the owner contends that the tenant 
      fails to specify which improvements claimed by the owner were allegedly 
      never made.  Since the tenant resides in the apartment, the failure to 
      identify what items the tenant is disputing makes it impossible for the 
      owner to respond in detail.  The owner further contends that the tenant 
      has never filed a complaint alleging reduced services.

      The Commissioner is of the opinion that the owner's and the tenant's 
      petitions should be denied.

      Pursuant to Sections 2522.3(e)  and  9f)  of the Rent Stabilization Code 
      effective May 1, 1987, for fair market rent appeals filed after April 1, 
      1984, comparability will be determined based on the following:

           (e) . . . (1)  Legal regulated rents, for which the time
                     to file a Fair Market Rent appeal has expired           
                     and no Fair Market Rent appeal is then pending,
                     or the Fair Market Rent appeal has been finally
                     determined, charged pursuant to a lease commencing
                     within a 4 year period prior to, or a one year 
                     period subsequent to, the commencement date of the 
                     initial lease for the housing accommodations
                     involved; and

                     (2)  At the owner's option, market rents in effect 
                     for other comparable housing accommodations on the
                     date of the initial lease for the housing 
                     accommodation involved as submitted by the owner
                (f)  Where the rents of the comparable housing
                     accommodations being considered are legal
                     regulated rents, for which the time to file a
                     Fair Market Rent Appeal has expired, and such
                     rents are charged pursuant to a lease ending
                     more than 1 year prior to the commencement
                     date of the initial lease for the subject 
                     housing accommodation, such rents shall be up-
                     dated by guidelines increases for 1 year
                     renewal leases, commencing with the expiration
                     of the initial lease for the comparable housing                    accommodations to a date within 12 months prior
                     to the renting of the housing accommodations

      The owner objects to the Administrator's exclusion of all three proposed 
      comparables in the same building, #8A, #4E, and #11A.  Section 2522.3(e) 
      of the Rent Stabilization Code, cited above, states the time limitations 
      for the initial stabilized rent of a comparable apartment, and apartment 
      #11A does not meet those requirements,  having been rented to an initial 
      stabilized tenant more than one year after the initial stabilized 
      renting of the subject apartment.  Therefore, that apartment was 
      properly excluded from the comparability study.  With regard to 
      apartment #4E the record indicates that the owner submitted to the 
      Administrator a Notice of Vacancy Decontrol for that apartment and a 


      copy of a certified mail return receipt which has no postal stamp and is 
      undated.  With the petition, the owner submitted a  a copy of a DC-2A 
      notice for that apartment the same certified mail receipt and an 
      affidavit from the managing agent.  It is noted that the owner has 
      protested the failure of the Administrator to send a follow-up notice to 
      the owner regarding the insufficiency of the comparability data.  Even 
      considering both the documentation for apartment 4E submitted to the 
      Administrator and the documentation submitted with the petition, the 
      Commissioner finds that this documentation, particularly the undated 
      return receipt with no postmark, is inadequate to prove service of the 
      DC-2A notice on the tenant, and therefore, apartment 4E was properly not 
      used as a comparable.  With regard to aparment #8A, the withdrawal 
      agreement signed by the tenant of that apartment was entered into after 
      the issuance of the Administrator's order in this case and therefore, at 
      that time the owner was asked to submit comparability data the 
      submission of apartment 8A as a comparable was improper because of the 
      pending fair market rent appeal.

      With regard the owners proposed comparables for apartments in buildings 
      in the same general area the owner submitted those apartments as market 
      rents under Option B.  However, the owner has indicated that those 
      apartments are rent stabilized, and they are therefore not appropriate 
      for consideration as market rents.  In addition, the owner failed to 
      submit adequate data for those apartments to be considered as legal 
      regulated rents under Option A.  Although the owner has requested that 
      the comparability study be based on DHCR's registration records, the 
      owner is required to submit the comparability data which the owner 
      wishes to have considered in the comparability study.  Court precedent 
      has held that comparability  in fair market rent appeal cases must be 
      based on individualized studies and that where no comparability data is 
      available, the fair market rent may be determined based on the special 
      fair market rent guidelines alone.  The DHCR is not obligated to search 
      its records for usable comparability data, which might not be available 
      in every case.  If an owner wishes to exercise the option of having the 
      comparability data considered in the determination of the fair market 
      rent, the burden is on the owner to submit such data, including data for 
      complete lines of apartments, leases or other rental documentation, as 
      well as proof of service of initial legal regulated rent notices  (DC-2 
      notices)  or apartment registration forms, which is not available from 
      DHCR records.  

      The Commissioner therefore finds that this portion of the owner's 
      petition should be denied.

      The owner also errs in claiming that the tenant did not timely file an 
      appeal because, the tenant had  "filed a rent overcharge complaint on 
      rent overcharge forms and did not file a fair market rent appeal within 
      the 90 day period . . . ."    Furthermore, since a complaint of rent 
      overcharge was the proper proceeding this also must be dismissed, since 
      all rent increases subsequent to the initial rent were in accordance 
      with the guidelines.

      The Commissioner finds this argument to be without merit.  As the first 
      stabilized tenant, the complainant was properly eligible for a fair 
      market rent appeal even if it was filed on an overcharge complaint form.  
      It is noted as well that the subject tenant clearly inscribed "Fair 
      Market Rent Appeal" on the complaint form, and specifically stated that 


      he was challenging the initial stabilized rent.  The owner failed to 
      submit proof of service of the DC-2A notice on the tenant.  Therefore, 
      the tenant's complaint was properly processed as a fair market rent 

      The owner's calculation of the initial rent, without comparables, uses 
      incorrect amounts for the MBR and fuel cost adjustment.  The agency's 
      record verifies the accuracy of the Rent Administrator's calculations:  
      1984 MBR of $756.83 + increase under Rent Control order 2AC421610 of 
      $11.64 + 1985 fuel cost adjustment of $30.00 = $798.47.  It is noted 
      that the subject apartment was not listed on the 1986 Fuel cost 
      adjustment filed in April of 1986 (the apartment was vacated in March of 
      1986) and therefore the 1985 fuel cost adjustment was used in the 
      calculations.  To this, the Administrator added a 20% increase under 
      Special Guidelines Order 17, for a total of $958.16; plus, $260.81 for 
      apartment improvements ($10, 432.27 - 40 = $260.81) = $1,218.97 fair 
      market rent.  

      Insofar as the tenant's petition makes general allegations about the 
      owner's actual improvements to the apartment, the Commissioner sees no 
      reason not to endorse the Administrator's conclusion that the owner's 
      documentation was sufficient to establish the cost and completion of all 
      claimed improvements, while pointing out once more that roughly 20% of 
      the claim was denied as being in the nature of maintenance and repair, 
      for which no rent increase can be granted.

      The owner is directed to roll back the rent to the lawful stabilized 
      rent consistent with this decision and to refund the excess rent 
      collected by the owner.

      The owner is directed to reflect the findings and determinations made in 
      this order on all future registrations filed, citing this order as the 
      basis for the change.  Registration statements already on file, however, 
      should not be amended to reflect the findings and determinations made in 
      this order. 

      The owner is further directed to adjust subsequent rents to an amount no 
      greater than that determined by this order plus any lawful increases.

      THEREFORE, in accordance with the provisions of the Rent Stabilization 
      Law and Code, it is

      ORDERED, that the owner's petition for administrative review be, and the 
      same hereby is, denied, the tenant's petition for administrative review 
      be, and the same hereby is, denied, and, that the order of the Rent 
      Administrator be, and the same hereby is, affirmed.


                                     JOSEPH A. D'AGOSTA
                                      Deputy Commissioner


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